Housing Counselor Exam Prep Questions and Answer

Default - Answer- When no payments made after 60 to 90 days... 30 for FHA loans Front-End Ratio Equation - Answer- Monthly housing expenses/gross monthly income Front-End Ratio maximums - Answer- 28% or less - conventional loan 31% or less for FHA, 30% or less for rentals Back-End Ratio (Debt-to-Income) Equation - Answer- total monthly debt expenses/gross monthly income Back-End Ratio Caps - Answer- 36% for conventional loans and renters, 43% for FHA, 45% for Energy Efficiency Mortgage loan Four C's of Credit - Answer- Character, Capacity, Capital, Collateral Monthly housing expenses - PITIA - Answer- Principal, Interest, Taxes, Insurance, Association dues and special assessments Interest only Terms - Answer- Only pay interest in monthly payments - good for fluctuating income, but can make payments on principal when they can FHA loans good for: - Answer- those who do not qualify for conventional because of flawed credit history, bankruptcy, high debt-to-income ratios, or limited funds for down payment & closing costs USDA loans - Answer- United States Department of Agriculture - Rural development program USDA guaranteed loans are for - Answer- those who make less than 115% of Area Median Income, or AMI, no funds for down payment, and without adequate housing. USDA Direct loans are for - Answer- those who make less than 80% of AMI, unable to obtain other financing but have reasonable credit... loans can go for up to 33 or 38 years Mortgage Insurance - Answer- Protects lender if you stop making payments, Required if down payment is less than 20% of home value 2nd Mortgage - "Piggy back" - Answer- assures 1st mortgage is only 80% of sales price -- will mean higher interest rates and more fees Loan to Value Ratio -- LTV Ratio - Answer- % calculated by dividing the amount of outstanding loan amount by the value of home Lender must terminate PMI when LTV ratio reaches: - Answer- 78% OR at midpoint of loan, i.e. 15 years of 30 year mortgage Adjustable Rate Mortgage - Answer- 30 year, interest rate set for 1st 5 years then adjusts annually ARM good for: - Answer- Those who have $ for down payment, wants lower interest rate for few years and may not own home for more than 5 years Federal Housing Choice Voucher Program - Section 8 - Distributed by local Public Housing Agency, or PHA - Answer- Family income must be lower than 50% of AMI, Voucher must pay 30% of gross income, family pays the rest Redlining - Answer- Illegal Practice of refusing to make loans because of predominant race, color, national origin, religion, sec, disability or familial status of the residents in the neighborhood Blockbusting - Answer- Trying to convince someone to sell or rent a dwelling because of the entry into the neighborhood of a particular person 1954 Brown vs Board of Education - Answer- Supreme Court says GOV can longer support segregated programs Civil Acts Right of 1964 - Answer- No discrimination in programs that receive federal funding Civil Acts Right of 1968 - Answer- Title VIII - "Fair Housing Act - prohibited discrimination in housing sales, rentals and financing based on race, color, national origin and religion. How long you have to file a complaint - Answer- 12 months after incident occurred. Fair Housing Act now protects how many characteristics? - Answer- 7 -- race, color, national origin, religion, sex, disability, and familial status Reasonable Modification - Answer- Structural modification made to allow persons with disabilities full enjoyment of facilities Reasonable Accommodation - Answer- Change in rules, policies, practices, or services Fair Housing Assistance Program - Answer- FHAP - Provides funding to state and local agencies to help enforce fair housing laws. Fair Housing Initiatives Program - Answer- FHIP - Provides funding to fair housing organizations and nonprofits that assist possible victims of housing discrimination Process of Filing a Complaint - Answer- Intake, Filing, Investigation, Pre-determination Conciliation Marketing Analysis - Answer- Aims to identify groups of ppl who would benefit most if targeted by the campaign, their characteristics, and their expectations To assist clients who may utilize them, counselors should research AFFH rules for: - Answer- HUD-funded program Designed to help State or Local jurisdictions to access housing development needs - Answer- Consolidated Plan URLA form - Answer- Uniform Residential Loan Application -- Outlines client's financial history -- loan info, property info, personal info, income, debt, assets ECOA - Answer- Equal Credit Opportunity Act -- requires lenders to make credit available equally -- file complaint to FTC RESPA - Answer- Real Estate Settlement Procedures Act -- prohibits abusive practices that increase cost of settlement AND requires transaction disclosures describing closing costs, lending services, etc. -- file complaint to Consumer Finance Protection Bureau TILA - Answer- Truth in Lending Act -- Lenders must provide loan costs info so they can shop around -- file complaint to FTC TRID - Answer- TILA-RESPA Integrated Disclosure Rule -- "Know before you Owe" rule - requires easy to use disclosures -- Loan Estimate to help understand key features, costs and risks of loan AND Closing Disclosure to help understand all costs of transactions HOEPA - Answer- Home Ownership and Equity Protections Act -- to address abusive practices in refinances and closed-ended home equity loans with high interest rates or high fees Two pamphlets counselors must provide on home inspections - Answer- For your protection get a home inspection AND 10 questions to ask a home imspector Type of Homeowner's insurance that reimburses for repairs for damage from perils - Answer- Structure Coverage Type of Homeowner's insurance that provides funding for housing and food when you cant live in home - Answer- Loss-of-Use Coverage